Hertler Market Signal Update
#667 November 17, 2013
Editor, Wally Hertler
The indicators are mixed with SMI becoming bullish
The Smart Money Index rallied once again to the declining 50-day moving average, which has acted as resistance for well over a year. A declining trend can be considered bullish because of the sometimes inverse relationship between the SMI and stock prices.
The late market component (LMC) of the Smart Money Index surged above the 50-day moving average, something it has not been able to do since April 2013. This is bullish.
The EMC (early market component of the SMI) continued to rally last week, but it remains below earlier highs. It is showing divergence with the S&P 500, which may be bearish. But, above both moving averages it is considered to be bullish for now.
Barron’s Confidence Index rose slightly to 72.6. The recent trading range apparently represented a reversal, and it is becoming bearish.
The smart money OEX put/call ratio has fluctuated in a range that can be defined as bearish around 1.9 and bullish around 1.4. The ratio, unchanged from last week, remains well below 1.4 and is bullish.
The “smart money” OEX 15-day P/C open interest rose a bit last week, but it remains deep in bullish territory.
The equity put/call ratio is about unchanged from last week and at a low extreme. This is very bearish and in unusual contrast with the “smart money” put/call data, which are very bullish. Both the dumb money and the smart money are heavily into call-buying!
The total put/call ratio fell to a new low, which is bearish.
The small cap/DJIA ratio rose a bit last week. A rising ratio is bullish, but peaks in the ratio often occur at small cap highs. Unless the ratio makes a new high again, it is a bearish indication.
The ratio of the NASDAQ Composite to the S&P 500, after falling sharply, is attempting, thus far unsuccessfully, to make a new high. A new high would be bullish for stocks.
The Fear Index buy signal is still in place.
The AAII Member Bullish Oscillator spiked near record highs. It is just below an extreme of optimism and is bearish.
The Investment Advisors Bullish Sentiment Oscillator surged to the highest in nearly nine years. Every time it has been near such an extreme there have been declines of varying magnitudes in the DJIA.
The Citigroup Panic/Euphoria Model (from Barron’s) remains at 0.42 just below the euphoria level. It is very bearish.
The Fear Index buy signal remains intact.
The (dumb money) equity and total put/call ratios are bearish. At the same time the OEX put/call ratio is very bullish, which is unusual.
The Citigroup Model remains close to a bearish extreme.
The AAII member and Investment Advisors newsletters are at euphoric extremes.